Narrow Focus May Clean Wmx's Slate

As Leadership Search Lingers, Concentration Is Put On Company's Roots--the Garbage Business

May 04, 1997|By Casey Bukro, Tribune Staff Writer.

When it comes to garbage, the rich are just like the rest of us. Even on Chicago's glitzy Gold Coast, the trash needs to be picked up and hauled away each day.

That's what Jim Scudder does as he wheels his "packmaster" garbage truck through heavy traffic and narrow alleys for WMX Technologies Inc., a $9 billion global environmental services company that is reinventing itself by going back to garbage.

Critics say WMX went astray by branching out into non-core businesses like environmental consulting and engineering, industrial and municipal water treatment, hazardous waste fuels and scaffolding--major efforts that produced only about 10 percent of the company's revenue while sapping its resources.

Founded in 1968 as Waste Management Inc., the Oak Brook-based company changed its name in 1993 to WMX Technologies Inc., using its stock trading symbol to reflect a company transforming itself into a global environmental services company.

Reversing course mid-last year, WMX has been aggressively selling off $2.5 billion in non-core businesses and assets and wants to return to its original name, Waste Management Inc., in the belief that's what best describes what it is and what it does.

This name change is one of the proposals that will be raised May 9 at the annual meeting as WMX struggles through the bruising aftermath of dwindling share value, the Feb. 18 resignation of its chief executive in a brutal clash with shareholder activists and the March 7 arrest of a company official on allegations of industrial espionage in California.

There has never been any doubt in Jim Scudder's mind as to the company's mission.

"Without us, there is no Waste Management," said Scudder, speaking for all the company's garbage truck drivers who empty trash bins into their lumbering trucks.

"We're the core," he said between stops at apartment buildings and businesses on the Near North Side of Chicago. "This is where it all started."

It started with garbage.

Waste Management Inc. began as a small Chicago garbage-hauling firm that grew into a global environmental services giant.

Waste Management grew by swallowing smaller competitors and adding clean air and water subsidiaries, plus environmental engineering in a bid to offer environmental service packages.

Chemical Waste Management Inc. was a high-flying subsidiary in the mid- to late 1980s, when toxic waste cleanups were a major national public policy concern. The company invested hundreds of millions of dollars in the subsidiary, called Chemwaste, expecting future demand for cleanup services.

But the industry collapsed in the early '90s because of the recession, successful efforts to minimize waste and few new governmental regulations for the treatment and disposal of hazardous waste.

Chemwaste was a major participant in early Superfund cleanups, earning billions of dollars in government revenue. But such projects today are few or non-existent as the government debates cleanup standards.

WMX bought back publicly traded shares of Chemical Waste Management in 1995, taking it off the market, and wrote down $140 million in assets.

During all this diversifying, dismayed stockholders watched WMX shares plummet from $60 a share in 1983 to around $29 now.

Chief among them were billionaire investor George Soros, who launched a vitriolic attack early this year against WMX CEO Phillip Rooney as unfit to run the company. A longtime WMX employee who had been CEO for only eight months, Rooney resigned shortly after he had launched a "back to the basics" campaign.

The key question now is what "back to the basics" and core business mean to WMX and others who criticize the company for becoming too confusing to investors.

These basic activities produced 90 percent of WMX's $9.2 billion revenues in 1996, and net income that fell 23 percent, to $477.8 million.

WMX bought landfills, expecting demand for waste disposal to keep growing 3 percent a year as it did in the early '80s. It's down to about one percent now, and expected business fueled by government enforcement did not materialize in the '90s.

WMX is less happy with its hazardous waste business and the low prices it commands, but Holsten said that "commercial and large industry accounts and customers want that service as part of their overall waste management plans."

Volatility in commodity prices, especially for paper, makes waste recycling profitability unpredictable, but Holsten said this is another core WMX business because "our customers want it."